The central hypothesis of the Center focuses on the role that functional abnormalities in the intrinsic circuitry of the dorsolateral prefrontal cortex (DLPFC) and in its interconnections with other brain regions, including the anterior cingulate cortex (ACC), play in the regulation of cognition in schizophrenia. These functional disturbances are hypothesized to arise during late brain (adolescent) development as a result of alterations in the molecular signals and structural elements that determine synaptic efficacy in the affected circuits. Studies conducted by this Project suggest that a specific form of cognitive dysfunction, a deficit in context processing, is a trait feature of schizophrenia that is present at the first episode, is stable across the course of the illness and is present in the unaffected relatives of schizophrenia patients. Basic functional MRI and computational modeling studies have suggested that context processing depends upon both the DLPFC (for representing and maintaining context), and the ACC (for monitoring for conflicts and modulating DLPFC accordingly). Using a multimodal functional neuroimaging approach that integrates high-density ERP and functional MRI, and a novel task that dissociates DLPFC and ACC functions in time, we propose 1) to investigate the relative contribution of DLPFC and ACC based cognitive functions to impaired context processing in never medicated first episode (FE) schizophrenia patients, and to determine the specificity of these abnormalities to schizophrenia, versus psychosis in general; 2) to test the hypothesis that the same deficits in DLPFC and ACC function in patients will be observed in their unaffected first degree relatives, confirming a relationship between impairment in the function of this circuit and the context processing deficits that are associated with a genetic liability to schizophrenia; and 3) to examine the developmental course of DLPFC and ACC based contributions to context processing in adolescent offspring of parents with schizophrenia, compared to non-high risk adolescent control subjects. This will enable us to directly test the hypothesis that cognitive deficits that reflect a genetic liability for schizophrenia are manifested through a disturbance in late brain development. These studies have many conceptual links to other projects in the Center and depend heavily on support provide by the Clinical Services Core-C and the Statistics and Data Management Core-D.